An Albertsons-Rite Aid Merger May Come With Risks

Though a combined Albertsons and Rite Aid could provide both companies with cost savings and sales benefits, the integration may not come easy. Moody’s said that the benefits of a merger may not be realized in the short term, industry news source FoodDive reported.

“Even if things go according to plan on the synergy front, we estimate they will take at least four years to fully be realized,” Moody’s wrote.

Overall, Albertsons has the burden of a debt load and Rite Aid has a weak brand. These challenges will have to be faced by Albertsons’ new President and COO, Jim Donald. He also has to navigate merging a pharmacy chain with a supermarket chain – and look over investments, such as meal-kit company Plated.

However, if the merger is successful, both brands could benefit from private-label products. Rite Aid could sell O Organics products, for example, along with Plated meal kits.

The news comes months after Albertsons announced that it would buy meal-kit company Plated. According to CNBC, the Albertsons deal was the grocer’s first big strategic move since Amazon‘s $13.7 billion deal to acquire Whole Foods Market earlier this year, which sent Kroger’s stock plummeting roughly 30 percent since the deal was announced.

“This transaction is the latest example of Albertsons meeting our customers wherever and however they like to shop,” Bob Miller, chairman and CEO of Albertsons, had said. “We are excited to offer our customers more online options and fresh, quality ingredients, along with distinctive recipes at their doorstep or through traditional shopping trips.”

Grocery-delivery startups attracted $1.4 billion in venture funding in 2016. And while just 23 percent of Americans buy groceries online, that share is expected to more than triple in under 10 years.

Furthermore, Amazon sent a signal in July that it is ready to join the industry when it registered a U.S. trademark for a service that will provide customers with “prepared food kits … ready for cooking and assembly as a meal.”